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Bloomberg: Russians are downsizing in Cyprus

Over the past few years Cyprus has embarked on a campaign to convince international partners that financial rules and regulations on the island have aligned with European best practices.

According to Bloomberg results are at hand as new Cypriot anti-money laundering regulations together with the effects of US sanctions against Russia and its high-profile businessmen are driving money away from Cyprus.

“Russians are downsizing in Cyprus,” said Kyriakos Iordanou, general manager of the Institute of Certified Public Accountants of Cyprus.

The value of bank accounts at Cypriot banks held by foreign nationals from outside the euro area fell to 7.1 billion euros at the end of November, according to the Central Bank of Cyprus. That’s down from 21.5 billion euros at the end of 2012.

Bloomberg reports that the En+ Group plc plans to move to Russia from Jersey rather than to Cyprus as previously planned. En+ is the main shareholder of aluminum giant United Co. Rusal, a company of billionaire Oleg Deripaska, who is on the US sanctions list. Accounts belonging to Viktor Vekselberg, who’s also on the US list and whose Renova Group is the largest shareholder in Bank of Cyprus, have been frozen, according to the bank.

In November, a directive from the Central Bank of Cyprus kicked in, giving lenders less leeway to work with shell companies. That’s making many Russian companies “non-bankable.”

“Amid sanctions and tightening compliance, Cyprus banks prefer not to deal with Russian money and Russian clients, even those who’ve had accounts in Cyprus banks many years,” said Evgeny Kogan, former director of the Center for Protection of Shareholders and Investor Rights of Cypriot Banks set up in 2014. “Russian clients are becoming toxic.”

Finance Minister Haris Georgiades said last month that the practices of maintaining large deposits by non-EU citizens accompanied with shell companies are finished stressing that Cyprus will not maintain such practices that contributed to the financial meltdown of 2013.